A recent study conducted by economist Chris Dawson from the University of Bat in the UK showed an interesting connection between financial optimism and the level of cognitive abilities. The results published in the journal personality and Sochology Bulletin are based on the analysis of the data of thousands of people in the UK, evaluating their economic future.
The study revealed that excessive financial optimism can be associated with a low level of cognitive abilities. It was previously established that a positive outlook on life is associated with the best health and general quality of life, including the quality of relations with others. However, too much optimism can lead to incorrect solutions, for example, in planning pension savings.
For the study, Dawson used data from the Understanding Society project, covering more than 40,000 households in the UK and Northern Ireland for the period from 2009 to 2021, as well as the data of the British home panel survey from 1991 to 2008. Polls included questions about the financial condition of the respondents and their expectations for the future. In addition, polls contained questions aimed at evaluating cognitive abilities, such as memory, recalling words, verbal flexibility, mathematical skills, and abstract thinking.
Analyzing the results, Dawson found that people with higher cognitive abilities are inclined to be less optimistic, while people with a low level of cognitive abilities observed a higher level of optimism. Moreover, respondents who showed the highest results in cognitive abilities tests were 22% more often in the categories of realists who evaluate their financial prospects more objectively, compared to those who showed low results.
These results can be important for understanding how the perception of the economic future is associated with the level of human thinking.